March 2011 Archive

To be a great analyst, it's not sufficient to say what will happen. The best analysts make the call and tell clients what actions they should take as a result. But before creating those client recommendations, it's vital that an analyst correctly predicts what will happen. Otherwise, those recommendations are based on the wrong foundations.

Earlier this year, we published our Smartphone Trends 2011 report, which I wrote back in November. In it, we set out the key trends that smartphone-related product strategy needed to be built around. There are numerous predictions in that report. But already at the end of the first quarter, we have successfully predicted numerous events. Read the report now for the rest.

Events that we predicted include:

The arrival of 3D smartphones from HTC and LG. We identified 3D smartphones as a trend that would arrive in western markets. It has: LG's Optimus 3D was announced at Mobile World Congress in February and goes on sale in Q2 in Europe. It's being sold in the US as the AT&T Thrill. HTC's 3D Evo was announced at CTIA for US CDMA networks and is coming to Europe too. My colleague Nick Thomas will be publishing a report on 3D product strategy across all devices soon and what actions firms must take now.

Amazon has just beaten Apple and Google to market with a cloud-based music locker service. As with the anticipated Apple and Google services, the Amazon cloud music product enables users to upload and stream their music on multiple devices (in this instance, on PCs, Macs, and Android phones and tablets – though not iPhones nor iPads). All US Amazon customers start with 5GB free and can then upgrade for $20 a year to 20GB, but buying an MP3 album at Amazon will automatically give the extra 20GB for free.

There are, of course, rights controversies around locker services. Digital music stalwart Michael Robertson is currently locked in legal combat with EMI over his cloud locker service MP3Tunes. The important factor with this service is that Amazon requires customers to upload their music file by file and store them rather than matching them against a cloud-based central repository of music, much in the same way that Carphone Warehouse currently does in the UK with its Catch Media-powered cloud locker service. (Which can be a pretty painful process for users. Remember the first time you ripped all of your CD collection? Now imagine doing that over the Internet . . .)

The rights issues, though of course important, aren’t the really interesting points here. What is interesting is why Amazon has done this, and what this means for the wider digital music marketplace.

I’ve been covering the digital music space for over a decade now, and when I first started doing so, EMI were one of, if not the, most innovative of the major record labels. They soon relinquished that mantle though, with Universal Music rushing to an apparently unassailable lead in the innovation stakes. And of course in more recent years EMI have had other more pressing distractions. But I’ve always had something of a soft spot for EMI, and it’s nice to finally be able to write about some truly innovative and "ahead of the curve" news coming out of Wrights Lane.

EMI have just announced a new iPad app version of Swedish house producer supergroup Swedish House Mafia’s "Until One." The product is actually an app version of the trio’s book and album combined with additional features layered on top (see screen shots below). Features include:

Categories:

Tim Armstrong is not the first CEO of a media company to try and bring some rigour and process to the creative process, and he won’t be the last. Whether The AOL Way, the training document that maps out a vision of 21st-century editorial production, will succeed — first, in getting AOL’s editorial team on board, and second, in creating a content experience that will engage fickle users and generate revenues — remains to be seen. But the exercise reminds us of the eternal challenge for the media industry — how to channel creativity to produce valuable and differentiated content.

From my experience working as an editor on magazines, on websites, and in TV, I wish Armstrong luck in implementing his vision. Much of what he is looking for makes sense: creating more content, more quickly; thinking about search optimization, traffic, and revenue; using more video. But such thinking is at the heart of Demand Media’s model, too. What is it about AOL content that will enable it to stand out in a crowded marketplace? Where is that X factor? How can AOL be distinctive as well as more efficient?

AOL, like its contemporary Yahoo, does not have the established brand values of an “old” media company like ABC, for example; arguably, it has had to acquire newer companies — such as TechCrunch and Huffington Post — to become a genuinely nimble and relevant content provider. The fear now is that if it’s a choice between “The AOL Way” and the highway, those within AOL who already know how to create compelling content will choose the highway: The signs from Engadget don’t look great.

Spotify have announced their 1 millionth premium subscriber. No doubt about it, 1 million paying subscribers is a big deal. No one else has done it in Europe or the US despite years of trying (that’s including stalwarts Rhapsody and Napster and new boys MOG and rDio). But the true significance of the milestone will be defined by what comes next.

1 million subscribers is an achievement worthy of celebration, but it is not (yet) evidence that premium subscriptions are a mass-market value proposition. Indeed when you take an impassioned view of Spotify’s premium offering, it’s actually not a lot different from what’s been in the market for years in the shape of Napster’s and Rhapsody’s portable subscription products. Sure, it is implemented in a superior manner (offline playlists, etc.) but the fundamentals remain the same: pay a monthly fee for music you never own.

The simple fact is that rented music for a monthly 9.99 fee is not a mass-market value proposition. Spotify’s 1 million represents 10% of their total installed base (though closer to 15% of their active users). So it is clear that the free Spotify product is many many times more popular than the paid-for product.

To break through to the mass market, Spotify will need to more aggressively pursue their subsidized partnerships (e.g., 3 and TeliaSonera) where the end user pays little or nothing for the service with it bundled with another product. That third way, navigating between the mass-market free consumers and the niche premium customers is the long-term route to mainstream premium customers for Spotify (and all other subscription services).

Amid the recent kerfuffle over Apple’s plans to relieve publishers of 30% of their subscription revenues, and Google’s swift counter offer, did we forget about that other great disruptor, Facebook? The social net is still growing: we were told last week that it has 30m active users in the UK. And despite denying that it is interested in becoming a content provider, it is becoming an increasingly important platform for consuming content. The announcement that Warner Bros is offering Facebook users the chance to rent The Dark Knight (for 30 Facebook credits, or $3) reminds us that the futures of traditional and social media are intertwined.

Facebook was never going to sustain its growth based on status updates alone. It needs a steady supply of content, like a fire that needs vast quantities of fuel. Social gaming has done a great job of bringing users in and keeping them on the site, ensuring a healthy mix of content and communications. But Facebook’s sheer scale means that it has become a significant platform for consuming and sharing other content such as music and now video (according to comScore it’s now one of the top 5 video sites by views in the US). With a massive user base and its own virtual currency, Facebook could yet become a significant platform for paid content (beyond the virtual goods of social gaming), especially via connected TVs.